Eighty-three percent of small businesses say they sought financial services from either large or small banks, according to new research published by the Securities and Exchange Commission’s Office of the Advocate for Small Business Capital Formation last week. Forty-nine percent of firms surveyed said they used a large bank for financial services and 45% said they used a small bank. Trailing behind banks were financial services companies (23%), credit unions (12%), online lenders or fintech firms (11%) and finance companies (8%).
The survey—which was conducted between July 1, 2020 and June 30, 2021—also noted that small businesses relied strongly on loans or lines of credit for capital: 89%, compared to 21% that use credit cards for external capital funding, 8% that use trade credit and merchant cash advances, respectively, 7% that use leasing and 6% that use equity investment.
Thirty-seven percent of small businesses said they sought financing during the survey period, and of those, 23% experienced a shortfall—receiving less funding that they applied for. Sixty-three percent said they did not apply for funding, and 47% said they had sufficient financing. Among firms that chose not to apply, 44% cited weak cash flow as a discouraging factor, 41% cited insufficient collateral, 36% cited too much existing debt, 33% cited low credit scores and 23% cited insufficient credit history.
As small businesses grappled with pandemic-related challenges, COVID-19 emergency assistance—including Paycheck Protection Program loans—also played a critical role; 91% of employer small business firms said they sought emergency funding, and 96% of firms that applied for PPP funding said they received the funds
